The Chairman of the Presidential Committee on Tax Policy and Fiscal Reforms, Mr. Taiwo Oyedele, has expressed surprise and disappointment over the rejection of tax reform bills by some states. Speaking during an interview on The Morning Show on Arise TV yesterday, Oyedele revealed that the Federal Government had anticipated resistance primarily from Lagos and Rivers states but did not foresee opposition from other regions.
“We had not envisaged that there was going to be push-back from the other states. We thought the push-back would come from Lagos mostly, maybe a little from Rivers,” Oyedele stated. “It’s almost like the people we are fighting for are now fighting us.”
Oyedele emphasized that the reforms were designed to ensure equitable distribution of value-added tax (VAT) revenue and align with constitutional provisions, particularly regarding derivation principles.
VAT Derivation and Constitutional Alignment
Addressing the sensitivity surrounding VAT derivation, Oyedele clarified that it differs fundamentally from oil and gas revenue derivation, which is based on production. He explained that VAT is consumption-driven, ensuring that all states benefit proportionately.
“If they’re not producing crude oil, you don’t get any part of that derivation. Whereas for VAT, every state consumes. If you share anything based on VAT derivation, everyone gets something from it,” he explained.
Oyedele further highlighted that the Federal Government’s proposals align with Section 163 of the Nigerian Constitution, which stipulates that certain revenues, such as stamp duties, should be shared based on derivation.
He cautioned against ignoring the principles of tax generation and distribution, warning that it could lead to legal challenges. “When it comes to matters of tax generation, we must recognize where they’re being generated. Otherwise, we end up in a situation where one state will get a Supreme Court judgment,” Oyedele said.
The reform bills aim to create a more equitable tax system while ensuring compliance with constitutional mandates. However, their reception underscores the challenges of implementing fiscal changes in a diverse federation.
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